Carla Mozee, Sara Sjolin
The FTSE 100 UKX, -0.15% dropped 0.2% to close at 7,327.13, breaking a 14-day winning streak. The index on Friday added 0.6% to 7,337.81, a 12th consecutive all-time closing high. Last week, the London benchmark rose 1.8%.
Sterling slides: Much of Monday’s focus was on the pound GBPUSD, +0.0581% as the British currency slid by more than 1% to $1.2055 compared with $1.2189 late Friday in New York.
Sterling had hit an intraday low of $1.1987, the lowest since its flash crash in October, on Sunday after British media reported that U.K. Prime Minister Theresa May will push for the country to leave the trading bloc’s single market in exchange for greater control of immigration policy.
Read: Why the pound flash crashed, according to the ‘central bank for central banks’
May has previously signaled the U.K. will move toward a so-called hard Brexit. She will outline her Brexit outlook in a speech scheduled for Tuesday.
U.K. Prime Minister Theresa May said in an interview Jan. 8 that Britain would make a definitive break with the European Union.
“It’s looking more and more like a ‘hard’ Brexit is in the offing and markets are responding. The currency market is the most efficient and swiftest to price it in. However, the full effects of a hard Brexit are not yet completely discounted by the markets, and so we could have further to run, depending on what is said tomorrow,” said Neil Wilson, senior market analyst at ETX Capital.
Wilson said in his note that the pound could hit $1.10 in the coming weeks.
Bank of England Governor Mark Carney is set to appear at the London School of Economics on Monday at 6:30 p.m., or 1:30 p.m. Eastern Time, and investors will watch for any comments he may make about the impact of Brexit on the British economy.
Investors “may not see the FTSE index continuing its stretch of record highs because the underlying sentiment is changing here, especially if May comes up with hard lines on Tuesday,” wrote ThinkMarkets UK chief market analyst Naeem Aslam in a note Sunday.
“Yes, there is no doubt that so far the economic data have been much stronger, but the reality is that so far there was no clear plan what the Brexit plan will be,” he said. A hard Brexit “would impact the economic growth of the country in the coming quarters.”
Individual movers: Pound weakness in recent months has pushed up shares of multinational companies, as the profit they make overseas is beefed up when it’s converted into pounds. Among such multinationals, shares of consumer goods products makers Reckitt Benckiser Group PLC RB., +1.61% RBGLY, -0.14% and Unilever PLC ULVR, +0.58% UL, -0.26% rose 1.6% and 0.6% on Monday, respectively. Luxury-goods maker Burberry Group PLC BRBY, +1.61% BURBY, +1.94% added 1.6%.
Burberry on Monday said Marco Gobbetti, currently CEO and chairman of Céline, will join Burberry on Jan. 27 and will become chief executive in July.
But the prospect of a hard Brexit was weighing on shares of some banks, which rely on passporting rules that allow them to more easily conduct business throughout the EU.
Barclays PLC BARC, -1.76% BCS, -0.09% fell 1.8% and Lloyds Banking Group PLC LLOY, -2.04% LYG, -1.51% gave up 2%. Separately, Royal Bank of Scotland Group RBS, -2.80% RBS, +0.00% lost 2.8% after Goldman Sachs downgraded the lender’s rating to neutral from buy in a note discussing valuations in the European banking sector.
Mining shares were higher, with Randgold Resources Ltd. RRS, +1.64% GOLD, +0.15% up 1.6% as gold prices GCG7, +0.61% hit an eight-week high.
All key U.S. financial markets were closed on Monday to commemorate Martin Luther King Jr. Day.